Stocks drop sharply amid critisim over banks’ corporate tax cut

Dhaka stocks dropped sharply on Sunday as investors went for selling shares, espeically banking stocks, amid experts’ criticisms about the government’s decision to cut corporate tax on banks and financial institutions in the proposed national budget for the fiscal year of 2018-19.DSEX, the key index of Dhaka Stock Exchange, lost 0.80 per cent, or 43.37 points, to close at 5,323.29 points on Sunday after losing 32.09 points in the previous session.The market began to dip sharply from the very beginning of the day that continued until the end of the session as investors kept taking out investment from the capital market, market operators said.On June 7, finance minister AMA Muhith proposed the corporate tax on financial entities at 37.5 per cent in the national budget that would increase the banks’ profitability.Currently, listed banks, non-bank financial institutions and insurance companies are paying corporate tax at the rate of 40 per cent.Market experts said that the news of corporate tax cut appeared to be weightless considering banks’ staggering amount of non-performing loans, scams and capital flight.They said that the banking malaise became a burden for the taxpayers and the government was pumping the taxpayers’ money into the infected banking sector where the bankers were allegedlly involved in the wrongdoings.The media on Sunday reported that the International Monetary Fund in a report on Saturday mentioned a number of risk factors in Bangladesh economy, including political unrest related to national elections and further deepening of crises in the banks.Moreover, a section of investors went for selling shares to get some cash to meet the Eid-centric expenses, market operators said.Eid-ul-Fitr, one of the biggest religious festivals for the Muslims, will be celebrated in the country on June 16 or 17.Moreover, the foreign investors were selling off their investment on strong dollar, political uncertainty and haphazard financial sectors.‘The market started with downturn and continued till the end of the session without any halt amid lack of confidence as the national budget for FY19 has no specific direction regarding the capital market except corporate tax cut for listed banks and financial institutions, which caused index to close in red zone,’ said EBL Securities in its daily market commentary.Therefore, the financial sector led the dive on the day with banks and NBFIs falling by 1.5 per cent and 1.2 per cent respectively.The share prices of cement, telecommunication and pharmaceuticals also declined on the day.On the other hand, the share prices of low-capitalised scrips including Queen South Textile Mills, Monno Jute Staffles and Key and Que continued to surge in the sluggish market on speculations.The turnover at the DSE dipped to Tk 407.72 crore on Sunday compared with that of Tk 454.41 crore in the previous session.Of the 335 companies and mutual funds traded on the day, 189 declined, 107 advanced and 39 remained unchanged.DS30, the blue-chip index of the DSE, plunged by 1.21 per cent, or 24.02 points, to finish at 1,954.05 points.Shariah index DSES shed 0.66 per cent, or 8.17 points, to close at 1,229.87 points.United Power Generation Company led the turnover chart with its shares worth Tk 18.82 crore changing hands.Monno Ceramics, Berger Paints Bangladesh, Pharma Aid, Bangladesh Export Import Company, Alif Industries, Intraco Refueling Station, Queen South Textile Mills, Legacy Footwear and Usmania Glass Sheet Factory were the other turnover leaders.Queen South Textile Mills gained the most with a 10-per cent increase in its share prices, while Purabi General Insurance Company was the worst loser, shedding 11.97 per cent.